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Turbulence Ahead for United

When is what appears to be good news really bad news? When UAL Corp's (OTC BB: UALAQ) United Airlines is involved. Yesterday, the Pension Benefit Guaranty Corp. (PBGC), the government arm that insures traditional pension plans, said it has petitioned a court to assume responsibility for $1.4 billion in retirement funds for United's pilots. The problem is that, in making the filing, the PBGC intimated that UAL could fund its obligations for its other three pension plans. Uh-oh.

That's a problem because United's pilots have worked out a tentative agreement whereby they would not contest a transfer to the PBGC in exchange for, among other things, $550 million in convertible notes. But a key condition of that deal was that the other three plans would also have to be canceled, ensuring pilots weren't left alone to the Feds.

That's what UAL wants, too. In a statement, the airline said the PBGC's decision doesn't have an impact on its need to cancel all of its pension plans and still secure $725 million in labor cost savings from its unions in order to emerge from bankruptcy. But it gets worse.

The PBGC said it needs to take over the pilots' plan now in order to prevent more than $140 million more in payouts. And that's supposedly important because the agency already operates at a $23 billion deficit. The pilots' reaction to the move was predictable and nasty. In a statement, the leader of the Air Line Pilots Association called PBGC's move "duplicitous" and a "December Surprise."

What's next? CHAOS could ensue. That's the name the flight attendants' union has given to a strike its members have authorized in the event that the company abrogates its union contract through bankruptcy court. (The airline is asking to have all of its union contracts cancelled to fundamentally alter its cost structure.)

The strike would come without warning and could take any form, with the intent to, as the acronym says, "create havoc around our system." Hopefully, both management and the flight attendants have learned enough from the circus at US Airways (OTC BB: UAIRQ) to keep this from happening. Because if it does, I see no way around liquidation for the nation's No. 2 airline.

For related Foolishness:

What do you think? Which airline stocks are being beaten down temporarily, offering the shrewd value investor a bargain? Which are heading for a crash landing? It's questions like these to which Philip Durell seeks answers for subscribers to hisMotley Fool Inside Valuenewsletter. You can get in on the action by taking a free, 30-day trial today.

Fool contributor Tim Beyers doesn't own shares in any of the companies mentioned, though he has family who are retired from United Airlines. If you'd like to know what's in Tim's portfolio you can check his Fool profile, which is here.

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